Funding Fees Definition - Glossary

Funding Fees are periodic payments between traders to maintain price parity between perpetual futures contracts and underlying asset prices.

Funding Fees are periodic payments exchanged between long and short positions in perpetual futures contracts. They ensure the contract price aligns with the underlying asset's market price. These fees prevent significant price discrepancies and are typically calculated based on the difference between the contract's market price and the spot price. If the funding rate is positive, long positions pay short positions. Conversely, if negative, short positions pay long positions. The fee is typically charged at regular intervals, such as every eight hours. It's a crucial mechanism for maintaining market stability and aligning futures prices with spot market conditions.